New West Company recently hired a new accountant whose
Question and Solution
New West Company recently hired a new accountant whose first task was to prepare the financial statements for the year
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New West Company recently hired a new accountant whose first task was to prepare the financial statements for the year ended December 31, 2014. The following is what he produced: The owner of the company, Lily Oliver, is confused by the statements and has asked you for your help. She doesn't understand how, if her owner's capital account was $75,000 at December 31, 2013, owner's equity is now only $24,680. The accountant tells you that $24,680 must be correct because the balance sheet is balanced. The accountant also tells you that he didn't prepare a statement of owner's equity because it is an optional statement. You are relieved to find out that, even though there are errors in the statements, the amounts used from the accounts in the general ledger are the correct amounts. Instructions Prepare the correct multiple-step income statement, statement of owner's equity, and classified balance sheet. You determine that $5,000 of the loan payable on the equipment must be paid during 2015. Taking It Further If a company uses a periodic inventory system, does it have to show on its income statement all of the details as to how cost of goods sold was calculated? Why or why not?
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